Don't think of getting coal if you don’t respond to the conditions—a report on the status quo of monopoly operation in coal transportation in Shanxi Jincheng City

Shanxi Jincheng is the country's largest anthracite coal base, supplying over 70% of the coal used by domestic ammonia and urea producers. Among the five counties and cities under Jincheng City, Yangcheng County stands out for its high-quality anthracite, which is in great demand. However, despite its significance, Yangcheng has no railway access, forcing all coal to be transported via road. Since the early 1980s, Yangcheng Coal Transportation Company has maintained a strict policy: although the highway was not officially open to them, they controlled the outbound coal traffic. To pass through their checkpoints, companies had to pay fees—otherwise, no one would transport a single ton of anthracite from their area. In the first half of this year, Yangcheng Coal Transportation Company established a new subsidiary, Nengxing Economic and Trade Co., Ltd. Soon after its formation, the company began renegotiating contracts with fertilizer producers that had previously signed long-term supply agreements. On August 5th, Jincheng Coal Chemical Co., Ltd. signed an agreement with Nengxing, stating that 130,000 tons of anthracite would be supplied by Nengxing for the second half of the year. According to Director Han of Jincheng Coal Chemical’s Supply Department, the company didn’t want to sign this new agreement, as they already had a full-year contract with Yangcheng Coal Transportation Company. They questioned why the new deal was necessary. Additionally, the new agreement required coal with a sulfur content of no more than 0.5%, while the previous coal from Yangcheng had a sulfur content of only 0.2%. The daily supply under the new agreement was just 300 tons, but the company consumed 900 tons per day, creating a significant supply gap. Moreover, the price increased from 550 yuan to 575 yuan per ton, adding over 3.2 million yuan in extra costs. Despite these issues, the company knew that without signing the agreement, they wouldn’t get any coal at all. Director Han told reporters, “All coal exports from Yangcheng County are controlled by Yangcheng Coal Transportation Company. They issue the invoices, and without their approval, no coal can leave. Re-signing with another company was just an excuse to raise prices.” Tianji Jincheng Chemical Co., Ltd., which produces 370,000 tons of synthetic ammonia and 600,000 tons of urea annually, faced the same situation. The company was forced to sign an agreement with Nengxing. According to the person in charge, the deadline set by Yangcheng Coal Transportation Company was August 25, and after that, they wouldn’t be able to obtain even a single ton of coal from Yangcheng. They were confused about how, in a market economy, such monopolistic practices could still exist. According to the company, the reduction in coal supply to local firms was due to the fact that transporting coal outside the province allowed them to collect higher provincial fees. In 1985, the former State Development Planning Commission introduced a policy allowing Shanxi coal companies to collect a transportation management fee of 12.5 yuan per ton during outbound shipments—known as the "coal fund." This policy had been in place for 20 years. However, according to WTO rules, it will end by the end of this year. Yangcheng Coal Transportation Company aimed to use this policy for the last six months before it expired. On August 22, when the reporter interviewed Ma Kejin, manager of Yangcheng Coal Transportation Company, he initially denied the existence of the agreement. After being shown the document between Nengxing and Jincheng Coal Chemical, he admitted it existed. He also denied that the establishment of the new company was for personal gain. He claimed that the National Development and Reform Commission had approved an additional five years of coal fund collection. However, on August 24, the reporter spoke with Wang Jinxiong, Deputy Director of the Industrial Policy Department at the National Development and Reform Commission, who stated that no final decision had been made on the continuation of the coal fund policy. Currently, both major chemical fertilizer companies in Jincheng City are facing declining coal inventories. As of August 22, Jincheng Coal Chemical and Tianji Company had less than five days of coal stock, far below the safety threshold of at least half a month. The companies reluctantly said that as long as the coal quality was guaranteed, they would accept higher prices. But the question remains: Who allowed local coal companies to monopolize the market like this?

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